SEBI to tighten algorithmic trading rules

Q. SEBI announced plans to tighten regulations for which type of trading?- Published on 01 Mar 17

a. Spot trading

b. Investor trading

c. Algorithmic trading

d. None of the above

ANSWER: Algorithmic trading

The Securities and Exchange Board of India (SEBI) plans to further tighten the regulations for algorithmic trading.

This aims to minimise instances of misuse of such systems that can be used to execute complex trading strategies at a very high speed.

SEBI chairman U.K. Sinha said that while India was one of the few countries in the world to regulate algorithmic trading - popularly called algo trading - the market regulator is looking to further strengthen the norms.

The aim is for instances of flash crashes that have happened overseas, and also in India a few times, could be minimised.

Algorithmic trading refers to the use of software programmes to execute trading strategies at a much faster pace.

On the National Stock Exchange (NSE), algo trades accounted for close to 16% of all trades.

On the BSE, it was 8.56% in January.

The SEBI chairman also said that while many countries and regulators, including the International Organization of Securities Commissions (IOSCO), have been debating on this issue for many years, only India had been able to come out with proper regulations.